Electronics and entertainment giant Sony is embarking on a multi-billion dollar three-year revamp after shocking investors by announcing heavy losses.

The company, creator of the PlayStation and maker of last year's hit film Spider-Man, said it lost 111bn yen in the first three months of 2003, almost 20 times the loss for the same period last year.

Part of the problem was the heavy cost of restructuring the ailing music division, but the widening losses have prompted Sony to spend 1.3 trillion yen ($10.8bn; £6.8bn) pulling itself back into shape.

The company plans to spend 500bn yen on new technology development, the same amount on price cuts for existing products and a further 300bn on restructuring the company and cutting costs.

Time to change

Overall, the financial year which finished on 31 March was solid for Sony, with an operating profit before one-off costs soaring sevenfold to 115bn yen.

Sony's PlayStation 2 dominates console gaming

The fourth quarter, from January to March, is traditionally the company's weakest.

But Sony Chief Executive Nobuyuki Idei made it clear that without prompt action things would continue to deteriorate.

"During the last quarter the whole world was on edge about when war would begin, so in March we put the brakes on production to keep inventories from piling up," Mr Idei told a news conference, saying the slowdown may have been "too strong".

"We cannot leave the situation unaddressed and let profitability tumble... In a way, we are now at a key transition phase."

One example of shifting market priorities is the PlayStation 2, by far the world's biggest-selling games console.

Its sales for 2003-4 are expected to fall to 20 million units from 22.5 million the year before, as the market saturates.